Motorola Solutions beats estimates on public safety spending

October 24, 2012|By Wailin Wong | Tribune reporter

Motorola Solutions' sign on the former Santa Fe office building downtown where it leases space for some employees. (Tribune file photo)

Motorola Solutions saw net profit rise in the third quarter from a year earlier, as continued strong government spending on public safety technology offset disappointing sales in the company's enterprise segment.

The Schaumburg-based company reported net income of $206 million, or 72 cents per share, up from $128 million, or 45 cents per share, in the third quarter of 2011. Sales rose 3 percent on the year, to $2.15 billion.

Motorola Solutions also disclosed Wednesday in a regulatory filing that it recorded $13 million in charges in the quarter related to the elimination of 700 jobs. Of those employees, 200 were direct and 500 were indirect. The 700-person figure consists of employees who were notified year-to-date through the third quarter, said Motorola Solutions spokesman Nicholas Sweers. Direct employees are generally hourly workers in areas such as manufacturing and supply chain, while indirect employees are those in professional roles, including engineering.

Brown told the Tribune that the cuts represented not so much a structural change at the company as "managing the ebb and flow of our cost structure." The affected employees were spread out across geographies and job functions, and there was no significant impact in the Chicago area, Brown added.

In the third quarter, Motorola Solutions' government segment saw sales jump 12 percent on the year to $1.5 billion, with double-digit growth in North America. Operating earnings rose to $273 million fro $186 million in the year-earlier quarter.

While "state and local governments continue to face budget choices," Chief Executive Greg Brown said on a conference call with analysts, many officials are making public safety technology a priority.

Spending in these areas include upgrading to digital systems, which over the long run offer cost savings and greater capabilities. Brown noted that the third quarter was the company's eleventh consecutive quarter of year-on-year growth in the government segment.

The enterprise division, which makes mobile computing products and communications equipment for industrial customers, fared considerably worse than the government side. Sales fell 13 percent on the year to $632 million and operating earnings dropped to $51 million from $68 million a year earlier.

About 3 points of the 13-percent sales decline can be attributed to unfavorable foreign exchange effects, Brown said. On a broader level, he said the quarter brought in "fewer large deals" as macroeconomic uncertainty continued to hover over customers.

Despite the disappointing quarter in enterprise, "we believe we're for the most part holding share, which is really important in these times," Brown said.

Some enterprise customers might be holding off on purchases until they see the capabilities of Windows 8, Microsoft's newest operating system. Motorola Solutions relies on Windows software for its enterprise computing products. While Windows 8 was designed initially for consumer use, Brown said Motorola Solutions officials are "having conversations at the highest levels of Microsoft" on how the software will be used in the industrial realm.

"We would work with Microsoft to have them provide, in future releases, support around customized applications and maybe unique form factors for hardware design," Brown said.

In mid-day trade, Motorola Solutions' stock was up 4 percent to $51.79.